Weekly Review
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April 28, 2009
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State's GAAP Deficit |
State's GAAP Deficit will Reach
Over $14 Billion by End of Next
Fiscal Year
The Commission on Government
Forecasting and Accountability
(COGFA) has released their
FY2009 and FY 2010 estimated
GAAP deficit.
GAAP stands for generally
accepted accounting principles.
The standard is established by
the Accounting Practices Board
of the American Institute of
Certified Public Accountants.
These rules, conventions, and
procedures define accepted
accounting practices.
FY2010 GAAP Report
According to COGFA the cash
basis fund balance calculation
starts with an estimated fiscal
year 2009 beginning cash balance
of $141 million. The FY 2010
beginning cash balance is
calculated by adding COGFA's
fiscal year 2009 estimated cash
basis revenues to the fiscal
year 2009 beginning cash balance
and by subtracting GOMB's fiscal
year 2009 cash basis spending
estimate.
FY 2009 Beginning Cash Balance:
$141 million
FY 2009 CGFA Est. Base Cash
Revenue:
$27,356 million
FY 2009 Est. Cash Spending:
-$31,460 million
FY 2009 Ending/FY 2010 Beginning
Cash Balance:
-$3,963 million
The above beginning cash balance
of -$3,963 million is simply the
calculation of the FY 2009
beginning cash balance plus cash
basis revenues less cash basis
spending. It does NOT include
almost $5 billion in Medicaid
liabilities that the state can
carry over to FY 2010.
The "modified accrual basis"
fund balance calculation starts
by adjusting the estimated
fiscal year 2010 beginning
balance for outstanding revenues
and liabilities not accounted
for in the cash basis beginning
balance.
FY 2009 Ending/FY 2010 Beginning
Cash Balance:
-$3,963.0 million
FY 2010 Cash Receipts
Attributable to FY 2009:
$1,574.0 million
FY 2009 Lapse Period/Section 25
Spending:
-$4,975.0 million
FY 2009 Ending/FY 2010 Begin.
Modified Accrual Balance:
-$7,364.0 million
The estimated fiscal year 2010
modified accrual basis ending
balance is calculated by adding
estimates of fiscal year 2010
modified accrual basis revenue
and subtracting GOMB estimated
fiscal year 2010 expenditures,
adjusted to a modified accrual
basis by subtracting estimates
of prior year lapse period and
Section 25 spending and adding
estimates of current year lapse
period and Section 25 spending.
FY 2010 Estimated Beginning
Modified Accrual Balance:
-$7,364.0 million
FY 2010 Estimated Modified
Accrual
Revenue:
$26,953.2 million
FY 2010 Estimated Modified
Accrual
Expenditures:
-$34,261.0 million
FY 2010 Estimated Ending
Modified Accrual
Balance:
-$14,671.7 million
The estimated fiscal year 2010
modified accrual basis ending
balance results in a deficit of
$14.7 billion. This
figure is nearly $3.3 billion
lower than the estimated cash
basis ending balance. This is
mostly because FY 2009 lapse
period / Section 25 spending is
anticipated to be much higher
than FY 2010 cash receipts
attributable to FY 2009.
COGFA's Budget Deficit
Clarification
In the Governor's FY 2010 Budget
Book, a budgetary walk-up is
included which shows the cash
balance budget deficit to be
$12.4 billion, which is
considerably less than the $14.7
billion deficit shown above from
COGFA. The primary reason for
this discrepancy is due to how
the modified accrual ending
balance is defined to be
calculated, especially as it
pertains to Section 25 spending.
The Section 25 provision allows
the State to pay any remaining
Medicaid bills from one fiscal
year with monies from next
years' appropriations. Because
of this, the budget can still
appear balanced on a cash basis
(or have a lower reported
deficit), even though the State
may not have sufficient funding
for the Medicaid program. On a
modified accrual basis, Section
25 liabilities from one fiscal
year that are pushed off into
the next fiscal year must be
counted in the year that the
liability is accrued. As a
result, when including these
Section 25 liabilities, the
modified accrual deficit will be
shown to be higher than the cash
basis deficit.
To read the entire report click
here.
Definitions
Cash basis budgets: A
forecast of estimated cash
receipts and disbursements for a
specified period of time. Cash
basis budgets are based on
estimates of the cash balance
available at the beginning of
the fiscal year, the amount of
revenue actually received during
July through June of the fiscal
year, the amount of expenditures
actually made during July
through June of the fiscal year,
and the ending cash balance.
A business operating on a cash
basis budget would record a
transaction when it was paid for
goods or services. This method
is good for a number of
businesses such as restaurants
and convenience stores. Paying
your bills works the same way as
well. You record the bill when
you pay it.
Accrual basis budgets:
Budgeting on a modified accrual
basis instead recognizes
revenues and expenditures as
they accrue. When a business
uses accrual basis accounting it
records a transaction as soon as
a customer is billed, whether
the business had been paid or
not. The same goes for state
government. An accrual basis
budget would record Section 25
Medicaid liabilities as they
happened, not as they were paid.
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From the
Capitol
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Calendar
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WHAT:
Rally for the Common Good
WHEN:
May 6, 2009
WHERE:
Capital Rotunda - Springfield
1:00pm to 3:30 pm
INFO:
If you or your organization
would like to participate please
fill out
a form here and
submit to Jennifer DeLeon at
stephen.taylor@lssi.org or fax
(847-635-6764) before Friday,
Apr. 3rd
WHAT: Dupage Federation
on Human Services Reform, Making
the Connection: Accessing
Public Benefits for Low Income
Persons
WHEN:
October 1, 8, 15, 22, 29
February 18, 25
March 4, 11, 18
June 3, 10, 17, 24
July 1
WHERE: All trainings held
at NIU Naperville, 1120 Diehl
Road, Naperville, IL
INFO: Making the
Connection training sessions
contain information in an
easy-to-understand format
regarding many programs
available to assist low income
persons.
Individuals who register for a
Making the Connection training
session now receive membership
access to the Federation's newly
developed Making the Connection
Illinois website, www.mtcil.org.
To register and for more
information please visit
www.dupagefederation.org.
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Do you have something to
add to the Weekly
Review?
email Chrissy Mancini @
cmancini@ctbaonline.org
___________________________________________________________________________
Center for Tax and
Budget Accountability
70 East Lake Street,
Suite 1700
Chicago, IL 60601
312-332-1041
www.ctbaonline.org
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